Adoption Of Customer
Relationship Management (CRM) Solutions
As An Effective Knowledge
Management (KM) Tool: A Systems Value Diagnostic
Andrew L S Goh, University of South Australia
ABSTRACT:
With
knowledge management (KM) expertise widely recognised as having a significant
impact on business performance, organisations are now eagerly leveraging from
the competitive advantage offered by KM tools to enhance customer relationships.
In recent years, the adoption of customer relationship management (CRM)
solutions has fast become prevalent in sectors such as the telecommunications,
finance and banking industries. Yet, as to how a CRM solution could act as an
effective KM tool has yet to be fully understood. This article examines the issues
relating to the challenges of CRM adoption. By developing a diagnostic
methodology, based on the Siebel Systems Value Diagnostic to propose an
assessment framework, it evaluates six functional areas using four levels of
adoption as the ranking protocol. In conclusion, the methodology evaluates an organisation’s
state of CRM adoption as
part of organisation-wide KM efforts.
1. Introduction
With knowledge management (KM) widely acknowledged to be of significant impact to business performance, it has resulted in a proliferation of KM tools for the corporate sector. Examples include the use of expertise access tools, e-learning applications, web portals, discussion and chat technologies, electronic message boards, synchronous interaction tools, and search and data mining tools. While the benefits of KM may correlate positively to bottom-line savings, like all investments, there is also considerable risk associated with KM investments, as they do not necessarily lead to expected benefits due to failures of adoption (Lindgren and Henfridsson, 2002; Storey and Barnett, 2000; Fahey and Prusak, 1998). Thus, to ensure that KM tools would eventually bring about intended benefits to organisations, IT decision-makers such as Chief Information Officers (CIOs) or Chief Knowledge Officers (CKOs) must be aware of the potential pitfalls accompanying the deployment of KM tools. In particular, the adoption issues surrounding the deployment of customer relationship management (CRM) solutions as an effective KM tool have attracted much attention. One reason cited was the high expenses involved in CRM implementation. Indeed, CRM solutions have been extensively reported to be the fastest-growing category of enterprise applications for KM tools, with world-wide revenues projected to grow more than 50% annually to reach sales in excess of US$67 billion by the end of 2005 (Toh, 2002).
Emergence of Software Tools
2.1. The
Shift from Data to Information to Knowledge Management (KM)
From the late seventies to
the early eighties, the development, acquisition and application of data
management tools seem to be the raison d'être for competitive businesses.
Subsequently, from the mid-eighties to the nineties, the managerial focus of successful
businesses shifted to information management. With this shift comes the
emphasis of information technology (IT) that has, in two decades,
revolutionised the way businesses are conducted. In the last few years, one key
aspect of most corporate strategies is the utilisation of knowledge assets to
improve business performance. Presently, the use of knowledge and its
management or termed generally as “knowledge management (KM)”,
which is defined below, has emerged as a highly prioritised area of managerial
concern (Goh, 2004a; Maryam and Leidner,
2001; Barth, 2000; Amidon,
1997; Davenport, 1996).
Data management and
information management, which are the traditional areas of management are now
secondary and in some business sectors, even obsolete. The shift to knowledge
management, together with the advent of CRM initiatives, has become inevitable
if businesses wish to succeed in the competitive global marketplace.
2.2. CRM Software Solutions
The centrality of KM in
today’s corporate strategies bears testimony that adopting the best KM
practices would lead to high-quality and cost-effective business solutions.
Many organisations recognise that acquiring and mastering KM as a core
competence can provide a new source of competitive advantage. Business managers
are now increasingly employing KM tools in corporate functions; and it seems
that failure to do so would impede business performance and thus undermine
corporate competitiveness. At the same time, with more discerning, sophisticated and demanding customers, organisations
are keen to use KM tools to manage customer relationships (Goh,
2004b; Gold et al, 2001). New ventures are now revolving
around customer-centric business models whereby buzzwords like “consumer
satisfaction” or “delighting customers” are considered to be
outdated. Instead, the more successful ventures focus on ensuring
“customer success” by combining expertise and skills in knowledge codification, creation and
utilisation to form productive relationships with customers (Clarke and Rollo, 2001; Blumentritt and Johnston, 1999). As
organisations are convinced
with the tangible economic benefits of customer relationship management (CRM), the relevance of CRM software
solutions has become more widely appreciated, with more organisations now hurrying to join
the race to acquire and develop in-house CRM capabilities.
3. Challenges of CRM Adoption
3.1. Heightening Interest for
CRM Solutions
Successful business models
mandate firms to continuously deliver customer success and thus
achieve customer loyalty, through superior service and excellent sales support.
Intense competition has
propelled managers to be constantly in search of novel ways of building,
cultivating and enhancing relationships with customers. One classic example is
the computerisation of a dynamic, up-to-date and
comprehensive knowledge base of customers’ needs, wants and requirements.
But until recently, most industry sectors, even with strong IT capabilities,
have yet to emerge as major CRM software users. In fact, many large global
firms are still a distance away from adopting CRM solutions in a big way.
Currently, the leading CRM users tend to be companies from the telecommunications
sector, banking and financial sector, and increasingly, the retail sector.
Nevertheless, the success stories of major CRM users in these sectors, which
had undertaken organisation-wide CRM implementation, have prompted
organisations to consider adopting CRM solutions. For instance, companies are implementing CRM
repositories as a strategic tool to monitor customer interactions and analyse
buying behaviour (O’Brien 2002; Dutta and Segev, 1999). In addition, IT companies, under constant
pressure to introduce new software solutions, are also pushing CRM adoption for
all business sectors. This heightening interest for CRM solutions resulted from
rising optimism that technological KM tools could offer an “intelligent
means” of storing, retrieving and disseminating knowledge that adds value
to customers, drives higher returns and hence improves business performance.
3.2. Managing CRM Performance
Despite the opportunities
offered by CRM, which offer a multitude of web-based capabilities and
solutions, its impact on business performance has yet to be fully realised.
While organisations are spending substantial amounts of money and resources on
CRM tools, its adoption often led to high customisation costs. For example,
studies conducted on the adoption of CRM systems reported that around 30
percent of firms are successful in implementation (Comb, 2004). In a survey
of European executives, it was found that CRM systems are unpopular and widely
condemned for not delivering business benefits. Of the executives surveyed,
less than a third felt that their CRM systems had lived up to expectations,
while nearly 10 per cent had yet to get their CRM systems up and running 18
months after installation. Industry analysts have also expressed
disappointment with the returns that CRM was delivering (Comb, 2004). The main
difficulties about CRM implementation entail overcoming barriers that cluster
around issues relating to cost, deployment time, maintenance and the value of
information. Even with strong support from information and communications
technology (ICT) infrastructure, organisations find it difficult to extract
maximum value from their CRM investments. This is because CRM solutions that
merely linked up IT systems do not automatically translate into economic
benefits unless adoption issues are addressed. Moreover, a CRM solution does
not guarantee better business performance since users need to know exactly how
to utilise it to deliver value to customers.
3.3. Integrating CRM Implementation
Although decision-makers of IT procurement are increasingly considering the
adoption of CRM to capture customer information, a lack of effective
integration has led to sub-optimal performance. Exploiting the full benefits of
a CRM tool requires the
integration of CRM repositories, capabilities and resources throughout an
organisation. Yet, in many instances, businesses operate through multiple
interaction channels, without proper integration, that undermine consistency in
customer service. However, if executed effectively, integration provides not only richer value to customers by interacting with other
data sources using CRM software, but also draws upon the organisation’s
existing systems of business functions (e.g. finance systems, inventory
systems, billing systems) to improve service delivery. Integration allows all
information about customers that the organisation could access, to produce
business insights into customer solutions; and equips an organisation with unified perspectives of
customers’ needs, preferences and habits that strengthen customer
intimacy and raise customer service levels. For example, some organisations are integrating CRM software to provide full-fledged solution that
encompasses supply chain management (SCM) and data warehousing systems (DWS) to
house critical business
information about customers for developing sales, marketing and delivery
strategies. Ultimately, the purpose of integrating CRM
implementation is to create superior corporate knowledge assets that empower
employees to build stronger customer relationships; and as a result, possesses
the ability to pre-empt, predict and anticipate customer needs. Also, with CRM
integration, organisations can leverage from strategic benefits offered by
other IT systems and tools to improve business performance.
3.4. Justification for CRM Adoption
While CRM adoption could
improve business performance, it is also vital to single out instances in which
it is particular critical. Three instances are identified. One, when a
firm’s nature of business requires it to instil
strong customer loyalty. This occurs usually in firms which already has a
strong base of existing customers that it would like to retain (e.g. via
customer lock-in) because it is less costly to increase sales from existing customers compared to
acquiring new ones (Birkin and Harris, 2003). For
example, it was reported that the cost of acquiring a new customer, in some
business sectors, may be almost twenty times that of retaining an existing
customer (Lykins, 2002). Two, there is constant pressure to minimise churn rate (e.g. the cost of winning customers)
and to reduce staff cost (e.g. the need to automate manual process). In such an instance, the source of
potential savings arising from a CRM solution comes from the acquisition of
customers itself. A CRM solution then presents a
powerful mechanism for creating orderly information, increasing process
efficiency and enhancing customer value. However, to adopt CRM effectively requires everyone throughout the organisation to
embrace a customer-centric view of business where knowledge about
customers’ needs is paramount. Three, there is a strong need to offer a greater variety or wider
choice of service packages and products to customers. The focus of CRM should
then enable the organisation to segment customers and
treat each segment of customers differently with suitably packaged products and
services. In such an instance, a CRM solution provides a cost-effective and more efficient
method in comparison to building one from scratch.
3.5. Evaluation of CRM
Investments
CRM implementation is an
expensive undertaking. Given the high investments, the initial costs of CRM
software must be offset against its long-term benefits. Researchers have
found that with the high turnover of customers varying between 8 and 40
percent, CRM solutions must enable firms to build long-term customer
relationships and leverage from customer loyalty to generate revenue (Seah, 2004). To maximise the success rate of CRM implementation, it is crucial to set
goals whereby the requirements are clearly defined. Furthermore, a CRM solution
should be cost effective and not have an overly aggressive timeline to fulfil.
Managers must understand the value a CRM solution provides and work on those
applications that most benefit their customers. Today’s CRM market is an industry where the technology has far outpaced the
sophistication of the user community to properly utilise
the tools, particularly in enterprise deployment. In addition, because CRM market offers a wide range of
expensive software applications, there is no way one could be guaranteed of
success ahead of CRM investments. Thus, it is beneficial to evaluate an
organisation’s level of “preparedness” for CRM adoption. Currently, CRM implementation is operating with a whole
host of best practices that focus exclusive attention on deployment
methodologies. Yet, a number of methodologies are available for evaluating CRM adoption. One
example is the UpShotâ guide for CRM –
which assures that seven less appealing characteristics of a CRM solution are
not neglected. Another example is the Siebel System Value Diagnostic that
allows an assessor to rank an organisation’s
level of CRM adoption. Other examples include eBestMatch™
or Systems of Alignment™ – which essentially help organisations to save time and money, achieve better and
reliable decisions when selecting enterprise software.
4. Diagnostic
Methodology for CRM Adoption
4.1. Assessment Framework and
Ranking Protocol
Depending on organisational
requirements, CRM solutions may consist of flexible deployment options that
cater to a wide range of budgets and needs. Built-in capabilities (e.g. data
warehouse) could also be deliberately included to improve its overall
performance. To systematically evaluate the level of CRM adoption within an
organisation, this article has developed a diagnostic methodology
based on (1) an assessment framework and (2) a ranking protocol. Using the
Siebel Systems Value Diagnostic that consists of six functional areas, an assessment
framework for CRM adoption is proposed. The
assessment framework, as pictorially depicted in Figure 1, illustrates how
these functional areas are organised and inter-related in an organisation. The
six functional areas consist of sales, service, marketing, employees, partners
and integration. The ranking protocol for CRM adoption, as shown in Figure 2,
provides the methodological approach for evaluating the level of adoption in
each functional area by assessing critical points of concern. If a more
detailed management tool needs to be developed, the diagnostic methodology can
be re-designed to include other assessment measures (e.g. quantifying
integrated best KM practices in managing relationships amongst customers,
employees, partners, suppliers and even prospects).
Figure
1: Assessment Framework for CRM Adoption
Figure
2: Ranking Protocol for CRM Adoption
4.2. Four-Level Adoption
Based on the ranking
protocol of the diagnostic methodology, the “overall average rank”
of CRM adoption can be determined. Four levels of adoption, as listed in Figure
3, are quantitatively distinguishable by the extent of competitive advantage
resulting from usage of CRM software tools. The four levels of adoption
comprise: (1) substantial improvement opportunities, (2) early-stage adopter,
(3) emerging leader and (4) best practitioner, in ascending order of adoption
(Level 1 is the lowest adoption and Level 4 is the highest adoption). Either
two or three critical points of concern for each functional area are ranked on
a scale of 1 to 4 to estimate the level of adoption in terms of business
processes or best practices.
Figure 3: Levels of CRM Adoption
|
|
Level of Adoption |
Description |
|
Level 1 |
Substantial Improvement Opportunities |
Developing and
implementing comprehensive customer, partner and employee relationship
management strategies to increase competitiveness and generate significant
financial returns |
|
Level 2 |
Early-Stage Adopter |
Building on early
successes to create competitive advantage |
|
Level 3 |
Emerging Leader |
Focused
achievement of best practices to intensify industry leadership |
|
Level 4 |
Best Practitioner |
Maintaining leading-edge business processes and best practices and ensuring consistent and efficient execution to extend competitive advantage over time |
4.3. Critical Points of
Concern
Undoubtedly, CRM places the
customer at the centre of all business activities within an organisation. Hence, no CRM adoption, regardless of how
technologically sophisticated it is, can be successful without taking into
consideration the critical points of concern for each functional area to
enhance customer relationships. The underlying reason behind the inclusion of
these critical points is basically to “listen to the customer’s
voice” rather than just merely deploying CRM tools to “plug process
gaps” – which can lead to exorbitant implementation and support
costs. By emphasising these critical points, an organisation could better harness
the strategic benefits of information systems and IT infrastructure already in
place and stretch previous IT investment dollars further. With reference to the
ranking protocol for CRM adoption, the critical points of concern for each
functional area are summarised below:
4.3.1. Sales
· Optimising sales team resource allocation and managing territories
· Ensuring that sales teams fully understand customers’ businesses, strategic and financial priorities and industries
4.3.2. Service
·
Managing
and minimising call centre agent turnover
·
Aligning
preventive maintenance plans and efforts with actual customer needs
·
Cross-selling
and up-selling effectively during service delivery
4.3.3. Marketing
·
Measuring
the return on marketing investments
·
Identifying
the optimal media channels to support individual campaigns
4.3.4. Employees
·
Keeping
employees informed of changed internal and external regulations, guidelines and
compliance requirements
·
Delivering
timely, high-impact training to employees, partners and customers
4.3.5. Partners
·
Joint
planning of product, selling, service and marketing efforts with partners
·
Coordinating
and managing effective marketing events with partners
·
Coordinating
joint service delivery with partners
4.3.6. Integration
·
Achieving
fast time-to-market for critical business process enhancements
·
Supporting
multiple integration technologies required by various applications
·
Propagating
data changes throughout integrated applications quickly and accurately
4.4. A Diagnostic Sample
Obviously, before
evaluating CRM adoption, organisations should examine business processes and
customer contact requirements that matter – which include documenting and
mapping end-to-end processes involving customers so that the assessment on all
functional areas would be more reliable and valid. To provide a typical example
for reference, a diagnostic sample of the company, Network Associates, as
assessed by Mr Anthony Smith, is illustrated in Figure 4. From the evaluation results, it demonstrated
that the company is an emerging leader in CRM, with potential of being a best
practitioner of CRM, particularly amongst the company’s employees.
Figure 4: A Diagnostic Sample
|
ORGANISATION: Network Associates Pty Ltd |
ASSESSOR: Anthony J. Smith
|
date:
|
Average Rank |
||||||
|
Functional Area |
Critical Points of Concern |
Ranking
|
|||||||
|
1 |
2 |
3 |
4 |
||||||
Sales
|
Optimise sales team resource allocation and managing
territories |
|
X
|
|
|
|
|||
|
Ensure sales teams fully understand customers’
concerns |
|
|
|
X |
3 |
||||
|
Service |
Manage
and minimise call centre agent turnover |
|
|
|
X |
|
|||
|
Align preventive maintenance plans with actual
customer needs |
|
X |
|
|
|
||||
Cross-sell and up-sell effectively during service
delivery
|
|
|
X |
|
3 |
||||
|
Marketing |
Measure the return on marketing investments |
|
X |
|
|
|
|||
|
Identify optimal media channels to support campaigns |
|
|
|
X |
3 |
||||
|
Employees |
Keep
employees informed of regulations and guidelines |
|
|
|
X |
|
|||
|
Deliver timely, high-impact training for employees |
|
|
X |
|
3.5 |
||||
|
Partners |
Joint
planning of selling, service and marketing with partners |
X |
|
|
|
|
|||
|
Co-ordinate
and manage marketing events with partners |
|
|
|
X |
|
||||
|
Co-ordinate
joint service delivery with partners |
|
|
X |
|
2.7 |
||||
|
Integration |
Achieve
fast time-to-market for business process enhancements |
|
X |
|
|
|
|||
|
Support
integration technologies required by applications |
|
|
|
X |
|
||||
|
Propagate
data changes throughout integrated applications |
|
|
X |
|
3 |
||||
|
|
Number of scores for each rank |
1 |
4 |
4 |
6 |
|
|||
|
|
Overall Average Rank |
3.00 |
|||||||
|
|
Adoption Description |
Emerging Leader |
|||||||
4.5. Evaluation Results
The evaluation results of
the diagnostic methodology offer a better appreciation of an
organisation’s “state of CRM adoption”. With the results, managers
may then focus efforts on utilising CRM to redesign existing processes
for addressing customer’s needs or to further fine-tune the nature of
customer relationships.
Take for example, realigning an organisation’s resources around Most
Valuable Customers (MVCs) and create new revenue
streams based on customer insights. In addition, it helps to refrain
from automating existing processes that are inefficient or unproductive and
thus avoid over-investing. The evaluation results also identify functional
areas for investing appropriate CRM tools and hence maximise the return on that
investment. Since a key part of CRM
adoption includes selecting the technological platform, an integral part of a
CRM solution also involves picking the “right technology”. So,
before adopting a new technology, it is prudent to require a “proof of
concept”. Like any enterprise software, the purpose of CRM is to ensure
that an organisation’s objectives are met, technologies are adopted and
processes are carried out, with the focused attention on customer-centric
issues – and hopefully, lead to less down time, higher close rate and
shorter sales cycles. Nevertheless, one must recognise that CRM is not a
one-time solution. Rather, it is an on-going commitment to continuously improve
business processes for better customer relationships – a goal that is
unattainable without supporting CRM tools, solution upgrades and roll-outs to
identify new customer-centric processes. The challenge is thus to continually
seek new CRM solutions that integrate effectively with existing IT
infrastructure and CRM tools, and yet deliver maximum value to customers.
5. Conclusion
This article has
conceptualised a diagnostic methodology for evaluating the level of CRM adoption
based on six functional areas: sales, service, marketing, employees, partners
and integration. Using the proposed assessment framework and ranking protocol,
an organisation’s business processes and best practices for managing
relationships amongst customers, employees and partners may be modelled,
analysed and evaluated. The diagnostic methodology provides information for
organisations to better implement their CRM solutions as part of
organisation-wide efforts towards, say, a cross-functional enterprise resource
planning system, to further enhance its effectiveness as a knowledge management
(KM) tool.
In conclusion, with the CRM
industry maturing, it is ostensibly clear that the benefits of CRM solutions
should no longer be reserved for large global enterprises with deep pockets for
IT tools and software applications.
Given that effective CRM adoption could lead to better return on
investments, all sectors of business are trying their utmost to leverage from
CRM solutions as a new source of competitive advantage. Yet, to manage customer
relationships effectively, relying blindly on KM tools alone is inadequate.
Installing a CRM solution is not an end-all and be-all to building a
customer-centric organisation. In all certainty, it is not a “magic
bullet” for poor customer relationships. The best bet for success is
still to first understand the issues relating to the challenges of CRM adoption
and then find the most suitable CRM solution that can provide maximum value to
address these issues.
6. References
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(4 July 2000), Information Today Inc., NJ
Birkin, S. and Harris, M.
(2003). “E-Business and CRM: Directions for the
Future”, Proceedings of the International Association for the Development
of Information Systems (IADIS) Conference June 3-6 2003,
Blumentritt, R. and Johnston, R.
(1999). “Towards a Strategy for Knowledge Management”, Technology, Analysis and Strategic
Management, Vol. 11, No. 3, pp. 287-300.
Clarke, T. and Rollo, C. (2001). “Capitalizing
Knowledge: Corporate Knowledge Management Investments”, Creativity and Innovation Management,
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Comb, C. (2004). “Assessing Customer
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transformation on the Internet”, European
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Fahey, L.
and Prusak, L. (1998). “The Eleven Deadliest Sins of
Knowledge Management”,
Goh, A. L. S. (2004a). “Enhancing Organisational Performance through Knowledge Innovation: A
Proposed Strategic Management Framework”, Journal of Knowledge Management Practice, Vol. 5 (October 2004).
Goh, A. L. S. (2004b). “Harnessing
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Initiatives”, International Journal
of Applied Management, Vol. 1, No.2, pp. 1-17.
Gold, A., Malhotra, A. and Segars,
A. (2001). “Knowledge Management: An Organizational Capabilities
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Lindgren,
R. and Henfridsson, O. (2002). “Using
Competence Systems: Adoption Barriers and Design Suggestions”, Journal of Information & Knowledge
Management, Vol. 1, No. 1, pp. 65-78.
Lykins, D. (2002). “Focus on Your Customers”, E-Business Advisor
(August 2002), Advisor Media,
Maryam, M. and Leidner, D. (2001). “Knowledge Management and
Knowledge Management Systems: Conceptual Foundations and Research
Issues”, MIS Quarterly, Vol.
25, No. 1, pp. 107-136.
O’Brien,
J. (2002). Management Information Systems: Managing Information Technology in
the E-Business
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and Barnett, E. (2000). “Knowledge Management Initiatives: Learning from Failure”, Journal of Knowledge Management, Vol. 4,
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2002), International Data Group (IDG),
About the Author:
Dr Andrew Goh
graduated with PhD and
MSc degrees from the
Dr Goh
can be reached at 38 Elite Terrace, S(458785),